Facts of the Case

The petitioner, Ashok Jain, was subjected to reassessment proceedings initiated by the Income Tax Department on allegations of involvement in VAT evasion and use of bogus documents. The Revenue alleged that income amounting to ₹86,45,876 had escaped assessment.

A show cause notice dated 13.03.2023 was issued proposing variation in income. The petitioner sought additional time via communication dated 22.03.2023 to collate relevant material. However, without addressing this request, the Assessing Officer passed an assessment order dated 12.04.2023 under Sections 147 read with 144B of the Income Tax Act.                                                           

Issues Involved

  1. Whether passing an assessment order without deciding the request for adjournment violates principles of natural justice.
  2. Whether reassessment proceedings under Sections 147/148A(b) can be sustained when procedural fairness is not followed.
  3. Whether allegations relating to VAT refund can lead to escapement of taxable income.

Petitioner’s Arguments

  • The petitioner contended that the allegation pertained to VAT refund and not VAT evasion, which cannot result in escapement of income.
  • It was argued that sufficient time was required to gather relevant documents and evidence.
  • The Assessing Officer acted arbitrarily by passing the order without responding to the adjournment request, thereby violating principles of natural justice.

Respondent’s Arguments

  • The Revenue alleged that the petitioner was involved in VAT evasion through bogus documentation.
  • It was contended that income chargeable to tax had escaped assessment.
  • The respondent relied on the material available on record to justify the reassessment proceedings.

Court Findings / Order

  • The Court observed that the Assessing Officer failed to consider the petitioner’s request for extension of time.
  • This amounted to a clear violation of principles of natural justice, as the petitioner was entitled to know whether his request had been accepted or rejected.
  • Accordingly, the impugned assessment order dated 12.04.2023 was set aside.
  • The Assessing Officer was granted liberty to pass a fresh order in accordance with law. 

Important Clarifications by Court

  • The petitioner was directed to file a reply to the notice issued under Section 148A(b) within four weeks.
  • The Court clarified that it had not examined the merits of the case.
  • All consequential notices, including demand and penalty notices, were held to collapse upon setting aside of the assessment order.

Sections Involved

  • Section 147 – Income escaping assessment
  • Section 144B – Faceless assessment
  • Section 148A(b) – Opportunity of being heard before issuance of notice under Section 148


Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/60823052023CW70792023_145153.pdf

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